Employer-Focused Digital Health Startups Continue To Drive Large VC Rounds

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This week, San Francisco-based employee wellness startup Omada Health announced that it has closed a $48 million Series C funding round led by returning investor Norwest Venture Partners and supplemented by fellow returning investors Andreessen Horowitz, Rock Health, and US Venture Partners. Humana, GE Ventures, and dRx Capital also joined the round as new investors. The new funding brings Omada’s total raised to $76 million since its 2011 launch. Fellow employee wellness startup Lumity from neighboring San Mateo has also closed a significant round this week, a $14 million Series A round led by The Social+Capital Partnerships, with participation from True Ventures and Rock Health.

Employee wellness startups have been reliably attractive to VCs since the beginning of the digital health investment boom. This trend that could be interpreted a number of ways, but the simplest explanation is employers are one of the few stakeholders in the healthcare ecosystem with money to spend and no conflicting interests around improving population health. Startups that can walk into an employer’s board room and present a business case showing a decrease in healthcare spend and an overall ROI on an investment are expected to have an easier time closing deals than startups selling directly into the the more complex healthcare space as its organizations limp through Meaningful Use stages, perpetually prepare for a questionable ICD-10 future, and debate fee-for-service vs. value-based reimbursement models.

Omada Health is pitching an online chronic disease management platform that it claims averages 65 percent sustained user engagement at the 12-month mark. Its diabetes platform was independently evaluated and associated with a five-percent loss in weight at 12 months, and a 0.37-percent drop in A1C levels. Omada estimates that each participant should reduce projected medical spend by $2,000 over a five-year period.

Lumity enjoys the luxury of offering its services to employers as freeware. The company gives its health insurance benefits management software to small and medium employers for free. The software analyzes business data to help employers select benefits options that make sense for their budgets and their employee needs, then manages the enrollment process for employees. The company acts as a broker between insurance companies and enrollees, earning its income from payers rather than the employers it serves.


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